5 steps to take before making the final payment on your student loan

Over the years, you have patiently watched your student loan balance decline with every payment. Even though you thought that day might never come, your final student loan payment is finally in sight.

Still, before it’s all sorted out, there are a few issues to keep in mind. Here are five steps to making that final student loan payment and what to watch out for:

1. Calculate if you can afford the final payment on your student loan
2. Find the amount of your winnings
3. Send your final payment
4. Get (and keep) your receipt
5. Make a plan for your extra cash flow

1. Calculate if you can afford the final payment on your student loan

If the money you have is more than your outstanding student loan balance, the good news is you can pay it off! But that you should use this money for making a final lump sum payment may depend on your situation.

First, make sure you can repay your student loan and still have enough money to cover your living expenses. Calculate how much is a month of your living expenses. Anything over that amount is disposable income that you can afford to spend on paying off student debt.

However, leaving enough money for an emergency fund in your bank accounts is also a good idea. Most experts recommend having at least two months of living expenses in savings, and maybe more depending on your situation.

If you have enough money to make the last lump sum payment on your student loan and your budget and emergency savings remain intact, go for it. You will save on interest and make a big profit.

If you’re not quite there yet, paying extra each month will help you pay less interest and reach your repayment date faster.

2. Find the amount of your winnings

If you are able to make the last payment on your student loan this month or the following month, it is a good idea to determine your repayment amount.

Your student loan manager has a current balance that shows how much you currently owe, but your repayment amount may be different. This is the amount you will need to pay to fully meet your loan terms and pay off your debt. It can include any overdue charges or interest that have been accrued but not yet added to your balance.

To find out how much you have earned, you can usually log into your agent’s website and view your current account statements. The amount of your payment must be included, clearly labeled, with a date until which it is valid. You can also call your agent’s customer service line to get your refund amount.

3. Send your final payment

Once you know your refund amount, you will know how much to send to your loan manager to fully repay your student debt. When you’re ready, just make a payment through your student loan account.

When you make the final payment on your student loan, send it in by the date the repayment amount is valid. If you wait, additional charges may accumulate and your payment may not cover the full amount owed.

You might end up having to pay off your student loan, but not pay it because you mentally crossed it off as paid off. This could cause you to miss payments and possibly even lead to default or default.

4. Get (and keep) your receipt

After your payment is made, you should get a letter from your student loan officer confirming that your loan has been paid off. Examine the letter carefully to make sure it is correct and that you have paid off the debt in full. If you do not receive this confirmation automatically, contact your student loan officer and request it.

Having this confirmation will protect you from any potential error on the part of the loan manager, or even your credit reports. If they claim that you still owe money for this debt, you will have tangible proof that you have fully paid it off. Save a copy to your computer and print another for your financial records.

5. Make a plan for your extra cash flow

By making the final payment on your student loan, you get rid of a monthly expense and free up more cash. After you’ve sent in your last student loan payment, the fun part comes: deciding how you’re going to use the new “extra” money in your budget each month.

If you have other loans that you are working to pay off, it is always a good idea to defer the money released to pay extra on your remaining debts. Other financially responsible choices might include building your emergency fund, increasing your pension contributions, or even saving for your child’s college education.

Whatever you want to do with that money, be intentional about how you use it. Make sure he’s going towards important financial goals instead of being burdened with frivolous spending or low-priority purchases.

And last but not least, congratulate yourself on getting rid of your student debt.

Rebecca Safier contributed to this article.

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